First Mariner to expand loan business nationally

Bigger mortgage unit is planned as industry braces for a decline

April 11, 2004|By Daniel Taylor | Daniel Taylor,SUN STAFF

Baltimore's First Mariner Bank hopes to expand its mortgage operation nationwide just as the home-lending industry is bracing for a slowdown.

The bank announced plans last week to expand its Northern Virginia operation and open a national wholesale mortgage business.

First Mariner officials said they hired 15 employees for the new division, which will be headquartered in Fairfax, Va., and provide loans to mortgage brokers throughout the country.

First Mariner's mortgage division employs 183 people in 12 offices in Maryland and Virginia. Its mortgage operation has focused on direct lending to consumers but hopes to compete with national companies that package and sell loans to brokerage firms.

First Mariner officials said they are expanding the lending operation because they hope to capitalize on consolidation elsewhere in the industry.

Edwin F. Hale Sr., First Mariner's chairman and chief executive officer, acknowledged that other lenders expect business to slow as interest rates rise, but he said his company is well-positioned to take advantage of a strong housing market in the Mid-Atlantic.

"If we felt earnings would drop back, we'd hold back," Hale said. "But right now we think this is a great time to be expanding."

Home sales and refinancing have posted records during each of the past three years as mortgage interest rates reached 45-year lows in June. Economists have been predicting that long-term interest rates will rise as the economy improves. Benchmark 30-year interest rates inched closer to 6 percent last week, making it more expensive to borrow money.

Mortgage lenders - who have expanded during recent years to meet the surging demand - are widely expected to cut back staff as the industry adjusts to more normal buying habits. The Mortgage Bankers Association of America expects lenders to shed about 65,000 workers nationwide during the coming year after the industry enjoyed record employment levels in 2003.

"The number of loan officers has dropped this year," said Bob Kaestner, president of the Maryland Mortgage Bankers Association and a vice president of Bank of America. "And that will continue to happen as long as interest rates go up."

Some analysts said First Mariner's move makes sense as the bank continues to grow from its 1995 beginnings.

"Ultimately it comes down to a scale issue," said Anthony Polini, an analyst with Midwest Research in New York who follows First Mariner Bank. "What they're trying to do is basically broaden their revenue stream with a little change in their expense base, and get more geographical diversification."

Hale said First Mariner's mortgage business would expand throughout Maryland and Virginia. Later, it will move to Delaware, Pennsylvania and southern New Jersey. He added that First Mariner would consider purchasing other mortgage lenders.

Brett Carter, president of the bank's mortgage division, said Maryland's strong housing market helped make this strategy possible for First Mariner even as national firms such as Washington Mutual Inc. of Seattle and Countrywide Financial of Calabasas, Calif., have scaled back. He said First Mariner's recent hires were laid-off employees of Washington Mutual.

"There has been solid growth in housing prices, not only in Maryland but also in Delaware, southern Pennsylvania and Virginia," Carter said. "The market that has been very strong has been our primary market, which has certainly helped our growth. You have to look to diversify, and that's one of our strategies."

First Mariner's primary market has remained in building and selling homes, a section of the industry that has remained relatively strong as refinancing has slowed, he said.

In December, the Washington Mutual and Countrywide announced plans to cut more than 6,500 jobs over several months as economists predicted long-term rates would rise.

But rates have remained below 6 percent for much of this year, and executives at both Washington Mutual and Countrywide said business has remained better than expected.

Adrian Rodriguez, a spokesman for Washington Mutual, said while the company is expected to cut positions, it hopes to open more offices throughout the country. Tara Rio, assistant vice president of public relations at Countrywide, said her company had similar plans. She said recent job cuts focused on temporary and contracted positions that were added during the refinancing boom.

In July, employment in the mortgage industry stood at 457,600, according to the Bureau of Labor Statistics. By February, that number dropped to 436,400. The figure, however, is up from 324,200 five years ago.

Jay Brinkmann, an economist with the Mortgage Bankers Association, said most of the recent layoffs were temporary workers and contractors, who were hired to help deal with the refinancing boom.

"What we've seen is that people have pretty much shed temporary help that they put on last year to handle volumes," Brinkmann said. "For the long term, however, there is probably still some consolidation planned."

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